diff --git a/google-cloud-spanner/src/main/java/com/google/cloud/spanner/SessionPool.java b/google-cloud-spanner/src/main/java/com/google/cloud/spanner/SessionPool.java
index 8d731f191c..3b2a0d2da3 100644
--- a/google-cloud-spanner/src/main/java/com/google/cloud/spanner/SessionPool.java
+++ b/google-cloud-spanner/src/main/java/com/google/cloud/spanner/SessionPool.java
@@ -1099,6 +1099,7 @@ private static enum Position {
   private final ScheduledExecutorService executor;
   private final ExecutorFactory<ScheduledExecutorService> executorFactory;
   private final ScheduledExecutorService prepareExecutor;
+  private final int prepareThreadPoolSize;
   final PoolMaintainer poolMaintainer;
   private final Clock clock;
   private final Object lock = new Object();
@@ -1143,6 +1144,12 @@ private static enum Position {
   @GuardedBy("lock")
   private long numSessionsReleased = 0;
 
+  @GuardedBy("lock")
+  private long numSessionsInProcessPrepared = 0;
+
+  @GuardedBy("lock")
+  private long numSessionsAsyncPrepared = 0;
+
   @GuardedBy("lock")
   private long numIdleSessionsRemoved = 0;
 
@@ -1224,15 +1231,14 @@ private SessionPool(
     this.options = options;
     this.executorFactory = executorFactory;
     this.executor = executor;
-    int prepareThreads;
     if (executor instanceof ThreadPoolExecutor) {
-      prepareThreads = Math.max(((ThreadPoolExecutor) executor).getCorePoolSize(), 1);
+      prepareThreadPoolSize = Math.max(((ThreadPoolExecutor) executor).getCorePoolSize(), 1);
     } else {
-      prepareThreads = 8;
+      prepareThreadPoolSize = 8;
     }
     this.prepareExecutor =
         Executors.newScheduledThreadPool(
-            prepareThreads,
+            prepareThreadPoolSize,
             new ThreadFactoryBuilder()
                 .setDaemon(true)
                 .setNameFormat("session-pool-prepare-%d")
@@ -1244,6 +1250,19 @@ private SessionPool(
   }
 
   @VisibleForTesting
+  long getNumberOfSessionsInProcessPrepared() {
+    synchronized (lock) {
+      return numSessionsInProcessPrepared;
+    }
+  }
+
+  @VisibleForTesting
+  long getNumberOfSessionsAsyncPrepared() {
+    synchronized (lock) {
+      return numSessionsAsyncPrepared;
+    }
+  }
+
   void removeFromPool(PooledSession session) {
     synchronized (lock) {
       if (isClosed()) {
@@ -1453,46 +1472,98 @@ PooledSession getReadSession() throws SpannerException {
   PooledSession getReadWriteSession() {
     Span span = Tracing.getTracer().getCurrentSpan();
     span.addAnnotation("Acquiring read write session");
-    Waiter waiter = null;
     PooledSession sess = null;
-    synchronized (lock) {
-      if (closureFuture != null) {
-        span.addAnnotation("Pool has been closed");
-        throw new IllegalStateException("Pool has been closed");
+    // Loop to retry SessionNotFoundExceptions that might occur during in-process prepare of a
+    // session.
+    while (true) {
+      Waiter waiter = null;
+      boolean inProcessPrepare = false;
+      synchronized (lock) {
+        if (closureFuture != null) {
+          span.addAnnotation("Pool has been closed");
+          throw new IllegalStateException("Pool has been closed");
+        }
+        if (resourceNotFoundException != null) {
+          span.addAnnotation("Database has been deleted");
+          throw SpannerExceptionFactory.newSpannerException(
+              ErrorCode.NOT_FOUND,
+              String.format(
+                  "The session pool has been invalidated because a previous RPC returned 'Database not found': %s",
+                  resourceNotFoundException.getMessage()),
+              resourceNotFoundException);
+        }
+        sess = writePreparedSessions.poll();
+        if (sess == null) {
+          if (numSessionsBeingPrepared <= prepareThreadPoolSize) {
+            if (numSessionsBeingPrepared <= readWriteWaiters.size()) {
+              PooledSession readSession = readSessions.poll();
+              if (readSession != null) {
+                span.addAnnotation(
+                    "Acquired read only session. Preparing for read write transaction");
+                prepareSession(readSession);
+              } else {
+                span.addAnnotation("No session available");
+                maybeCreateSession();
+              }
+            }
+          } else {
+            inProcessPrepare = true;
+            numSessionsInProcessPrepared++;
+            PooledSession readSession = readSessions.poll();
+            if (readSession != null) {
+              // Create a read/write transaction in-process if there is already a queue for prepared
+              // sessions. This is more efficient than doing it asynchronously, as it scales with
+              // the number of user threads. The thread pool for asynchronously preparing sessions
+              // is fixed.
+              span.addAnnotation(
+                  "Acquired read only session. Preparing in-process for read write transaction");
+              sess = readSession;
+            } else {
+              span.addAnnotation("No session available");
+              maybeCreateSession();
+            }
+          }
+          if (sess == null) {
+            waiter = new Waiter();
+            if (inProcessPrepare) {
+              // inProcessPrepare=true means that we have already determined that the queue for
+              // preparing read/write sessions is larger than the number of threads in the prepare
+              // thread pool, and that it's more efficient to do the prepare in-process. We will
+              // therefore create a waiter for a read-only session, even though a read/write session
+              // has been requested.
+              readWaiters.add(waiter);
+            } else {
+              readWriteWaiters.add(waiter);
+            }
+          }
+        } else {
+          span.addAnnotation("Acquired read write session");
+        }
       }
-      if (resourceNotFoundException != null) {
-        span.addAnnotation("Database has been deleted");
-        throw SpannerExceptionFactory.newSpannerException(
-            ErrorCode.NOT_FOUND,
-            String.format(
-                "The session pool has been invalidated because a previous RPC returned 'Database not found': %s",
-                resourceNotFoundException.getMessage()),
-            resourceNotFoundException);
+      if (waiter != null) {
+        logger.log(
+            Level.FINE,
+            "No session available in the pool. Blocking for one to become available/created");
+        span.addAnnotation("Waiting for read write session to be available");
+        sess = waiter.take();
       }
-      sess = writePreparedSessions.poll();
-      if (sess == null) {
-        if (numSessionsBeingPrepared <= readWriteWaiters.size()) {
-          PooledSession readSession = readSessions.poll();
-          if (readSession != null) {
-            span.addAnnotation("Acquired read only session. Preparing for read write transaction");
-            prepareSession(readSession);
-          } else {
-            span.addAnnotation("No session available");
-            maybeCreateSession();
+      if (inProcessPrepare) {
+        try {
+          sess.prepareReadWriteTransaction();
+        } catch (Throwable t) {
+          sess = null;
+          SpannerException e = newSpannerException(t);
+          if (!isClosed()) {
+            handlePrepareSessionFailure(e, sess, false);
+          }
+          if (!isSessionNotFound(e)) {
+            throw e;
           }
         }
-        waiter = new Waiter();
-        readWriteWaiters.add(waiter);
-      } else {
-        span.addAnnotation("Acquired read write session");
       }
-    }
-    if (waiter != null) {
-      logger.log(
-          Level.FINE,
-          "No session available in the pool. Blocking for one to become available/created");
-      span.addAnnotation("Waiting for read write session to be available");
-      sess = waiter.take();
+      if (sess != null) {
+        break;
+      }
     }
     sess.markBusy();
     incrementNumSessionsInUse();
@@ -1620,7 +1691,8 @@ private void handleCreateSessionsFailure(SpannerException e, int count) {
     }
   }
 
-  private void handlePrepareSessionFailure(SpannerException e, PooledSession session) {
+  private void handlePrepareSessionFailure(
+      SpannerException e, PooledSession session, boolean informFirstWaiter) {
     synchronized (lock) {
       if (isSessionNotFound(e)) {
         invalidateSession(session);
@@ -1643,7 +1715,7 @@ private void handlePrepareSessionFailure(SpannerException e, PooledSession sessi
             MoreObjects.firstNonNull(
                 this.resourceNotFoundException,
                 isDatabaseOrInstanceNotFound(e) ? (ResourceNotFoundException) e : null);
-      } else if (readWriteWaiters.size() > 0) {
+      } else if (informFirstWaiter && readWriteWaiters.size() > 0) {
         releaseSession(session, Position.FIRST);
         readWriteWaiters.poll().put(e);
       } else {
@@ -1792,6 +1864,7 @@ public void run() {
               sess.prepareReadWriteTransaction();
               logger.log(Level.FINE, "Session prepared");
               synchronized (lock) {
+                numSessionsAsyncPrepared++;
                 numSessionsBeingPrepared--;
                 if (!isClosed()) {
                   if (readWriteWaiters.size() > 0) {
@@ -1807,7 +1880,7 @@ public void run() {
               synchronized (lock) {
                 numSessionsBeingPrepared--;
                 if (!isClosed()) {
-                  handlePrepareSessionFailure(newSpannerException(t), sess);
+                  handlePrepareSessionFailure(newSpannerException(t), sess, true);
                 }
               }
             }